The stagnation of business activities caused by the COVID-19 pandemic does not only affect workers directly employed by the enterprises, through layoff and furlough. The effects of cancellation of orders and delays in payments also have a negative impact on supplier companies and their workers in domestic and overseas supply chains.

In particular, workers in SMEs and emerging economies positioned in the upstream of the supply chain are not adequately protected by governments and enterprises. They are at risk of serious impacts on their livelihoods and are actually affected both in Japan and overseas. This chapter analyzes the situation of such impacts in Japan and overseas, and overviews the responses and recommendations by international organizations, governments, companies, and related organizations.

 

In Japan, the Ministry of Economy, Trade and Industry (METI) is requesting buyer companies to take further consideration of transactions with subcontractors affected by the COVID-19 pandemic[1]. Private-sector stakeholders such as the Japan Business Federation (KEIDANREN)[2], Japanese Trade Union Confederation (RENGO) [3], the National Conference of the Association of Small Business Entrepreneurs[4] have also published recommendations also related to supply chain issues. While taking into account these efforts in Japan, this chapter presents following five key points for Japanese companies to mitigate COVID-19 impacts on domestic and overseas suppliers and their workers and to implement responsible corporate conduct.

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(1) Evaluate and disclose COVID-19 impacts, including its impact on workers in the supply chain

OECD’s Due Diligence Guidance[5] and its policy note on COVID-19 and RBC[6] should be referred to in assessing impacts. It is also beneficial to utilize simplified and rapid human rights due diligence tools published by UNDP[7], ILO[8], and BSR[9]. It is also crucial to understand what measures are taken to protect workers by governments in the countries and regions where their suppliers are located. ILO[10], OECD[11], and Fair Labor Association[12] is gathering such information.

 

(2) Particularly consider the impact on vulnerable stakeholders such as migrant workers

Because socially vulnerable individuals are particularly at high risk of being seriously affected by COVID-19 pandemic, it is important to carefully assess and respond to the effects, as described in Chapter 2 below.

 

(3) Explore ways to mitigate impacts while communicating with suppliers and workers as much as possible

The guidance documents on supply chain management published by Fair Labor Association[13] and Fair Wear Foundation[14] provide various options for mitigating COVID-19 impacts on suppliers and their workers. Appropriate consideration to subcontractors requested by the METI can be given not only to domestic but also overseas suppliers, including taking actions for subcontractors’ delay in delivery behind schedule; bearing cost burden appropriately; completing quick and flexible payment to subcontractors;, and taking appropriate actions for cancellation and change of orders.

 

(4) Respond appropriately to issues and complaints raised by workers and other stakeholders through supply chains

It is important for Japanese business to strengthen their grievance mechanisms, by referring to the Engagement and Remedy Guidelines[15]. This will enable companies to collect information useful for the assessment and mitigation of impacts and to ensure access to remedies for workers and other stakeholders. In order to respond quickly in the current crisis response, it is useful to refer to the Basic Actions for the Engagement and Remedy Guidelines.

 

(5) Investors can provide a clear message to Japanese companies on how to respond through supply chains

While referring to the initiatives of overseas investors overseas[16], Japanese institutional investors can give clear messages to Japanese companies that support and endorse the promotion of responsible business conduct through supply chains by responding to the COVID-19 pandemic.

 

[1] https://www.meti.go.jp/english/press/2020/0310_001.html

[2] https://www.keidanren.or.jp/policy/2020/031.html

[3] https://www.jtuc-rengo.or.jp/activity/kizuna/covid19/

[4] https://www.doyu.jp//policy/seisaku/doc/20200330kinkyuyoubou.pdf

[5] https://www.oecd.org/investment/due-diligence-guidance-for-responsible-business-conduct.htm

[6] https://read.oecd-ilibrary.org/view/?ref=129_129619-6upr496iui&title=COVID-19-and-Responsible-Business-Conduct

[7] https://www.undp.org/content/dam/undp/library/km-qap/RBAP-2020-Human-Rights-Due-Diligence-and-COVID-19.pdf

[8] https://www.ilo.org/empent/units/boosting-employment-through-small-enterprise-development/WCMS_741012/lang--en/index.htm

[9] https://www.bsr.org/files/general/BSR-Rapid-Human-Rights-Due-Diligence-Tool.pdf

[10] Country Policy Response (https://www.ilo.org/global/topics/coronavirus/country-responses/lang--en/index.htm )

[11] Country Policy Tracker (http://oecd.org/coronavirus/en/ )

[12] https://www.fairlabor.org/blog/entry/country-specific-updates-provisions-workers-response-covid-19-pandemic

[13] https://www.fairlabor.org/report/protecting-workers-during-and-after-global-pandemic

[14] https://www.fairwear.org/covid-19-guidance

[15] https://www.bhrlawyers.org/en-erguidelines

[16] ICCR (https://www.iccr.org/investor-statement-coronavirus-response ), PRI (https://www.unpri.org/covid-19 )